Texas businesses can now leverage faster, larger depreciation deductions thanks to updated franchise tax rules under the One Big Beautiful Bill Act (OBBBA). These expanded bonus depreciation opportunities offer more flexibility and significant tax savings for your business.

Until now, Texas businesses operated under the 2007 federal tax code, only allowing for depreciation spread over several years. Moving forward, Texas will use the current Internal Revenue Code for depreciation, speeding up your deduction so you can apply the full cost of qualifying assets immediately, beginning with your 2026 franchise tax report. That means instead of a multi-year deduction schedule, your first-year write-off is 100% for qualifying fixed assets placed in service after Jan. 19, 2025.

Updated Texas Franchise Tax Benefits

Here’s what the new Texas franchise tax depreciation rules mean for your business:

• 100% bonus depreciation in the first year for qualifying assets.
• Bonus depreciation to be included in cost of goods sold (COGS) calculation, plus a one-time catch-up adjustment between the old code and new rules.
• Ability to deduct more up front, thereby lowering your taxable margin.
• Simplified bookkeeping, allowing for one set of depreciation calculations.

What Qualifies for Bonus Depreciation in Texas?

Your everyday business investments might qualify for the updated Texas bonus depreciation rules, allowing you to write off 100% of certain assets in the first year of purchase. Examples include:

• Machinery and equipment.
• Furniture and furnishings.
• Computers, technology hardware and certain software.
• Certain new manufacturing or production facilities.
• Most tangible personal property with a recovery period of 20 years or less.

Here to Help

Take full advantage of the updated rules, reduce your taxable margin and simplify your compliance burden with help from our Texas tax accountants.